- Prior 41.2
Germany’s construction sector remains largely subdued in Q1 with little signs of optimism in general. All three subsectors continue to reflect declines in activity still. The only saving grace in the plans for infrastructure spending but that will take some time to play out. HCOB notes that:
“The sustained decline in activity in the construction sector may at first glance be surprising given the planned 500 billion euro special infrastructure fund. But of course it is much too early to expect a surge in growth just yet. What can be observed is that the index of future activity has jumped. However, it is still in the pessimistic zone, showing that companies are a bit sceptical about when and if the funds will actually be available. Things might look up once the coalition agreement is sorted and the new government is in place. The special fund is definitely a step in the right direction, giving companies some planning security and ensuring that public investment is not just a year-to-year decision.
“Across the board, things are not looking great. Residential construction, commercial real estate, and civil engineering all saw a faster decline in activity in March. Residential activity is under the most pressure, followed by commercial real estate. Civil engineering had shown some signs of stabilizing earlier this year but has taken another hit. However, this sector stands to benefit the most from the new infrastructure program. The approval of special funds means civil engineering companies can expect more follow-up projects, which should boost their willingness to maintain or expand their workforce and invest in new machinery. In fact, job cuts slowed sharply in March, hitting their lowest level since early 2023.
“The availability of subcontractors has risen again, indicating relatively low capacity utilization. This aligns with the 60% capacity utilization reported by Destatis. For once, this is good news for the German economy because it means that the planned increase in infrastructure spending will likely boost construction activity rather than just drive up prices. With the infrastructure fund decision, the conditions are in place for a recovery in the construction sector.”
This article was written by Justin Low at www.forexlive.com.